Dynamic Services, Inc. purchased computers that are to be used in its consulting services. Based on the matching principle, the related account that should appear on the income statement for the year ended December 31, 2018 is ________.
A) Depreciation Expense - Equipment
B) Service Revenue
C) Accumulated Depreciation - Equipment
D) Equipment Expense

Question

Quizplus · Accepted Answer

According to the matching principle, expenses should be matched with the revenues they help to generate. Since the computers are used in the consulting services provided by Dynamic Services, the related expense should be reflected on the income statement. Depreciation expense - equipment is the account that represents the assignment of the cost of the computers over their useful life, and it should be recognized as an expense on the income statement for the year ended December 31, 2018. Therefore, (A) is the correct answer.

(B) Service revenue represents the revenues generated by consulting services, which are related to the use of the computers, but it does not represent the related expense. 
(C) Accumulated depreciation - equipment is a contra asset account that represents the total depreciation assigned to the equipment since its acquisition, but it is not an expense account. 
(D) Equipment expense is not a recognized accounting term; the correct account is depreciation expense - equipment.